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Small Scale LNG a Way to Market for Stranded Coal Bed Methane in Indonesia Society of Petroleum Engineers Asia Pacific Oil and Gas Conference and Exhibition Neil Semple October 2013
The Lantau Group
We at The Lantau Group are experts in the economics of energy systems
Economic Consulting
Asset Valuation
Business & Regulatory Strategy
Competition, Markets, Regulation
Testimony
Market Analysis
Asia Pacific Energy Experts
Hong Kong
Seoul
(TLG Korea)
The founding partners
of TLG first worked in
the Asia Pacific region
as part of Putnam,
Hayes & Bartlett (PHB)
and later with Charles
River Associates
Office
Presence
1
The Lantau Group
Our partners and principals have consulted for leaders throughout the region
2
Financial Institutions
International Aid Agencies
Government Ministries
Market and System Operators
Regulatory Agencies
Independent Power Producers
Leading utilities
Oil & Gas companies
The Lantau Group
Displacing traditional fuels with onshore small scale LNG
3
Context
• Small scale LNG on a remote onshore gas field is a quick way to market production.
• No need to wait to prove up huge reserves to justify a pipeline.
• No need to then wait for the pipeline to be built.
• Cost of Small Scale LNG infrastructure leaves plenty of headroom for reasonable upstream gas prices.
• Some parts of Small Scale LNG equipment are now becoming standardised driving down costs.
• Remote small diesel-fired generation sets might also be able to get LNG in pressurised container tanks
• Large potential market in Kalimantan and Sumatra to displace diesel with LNG in mine trucks.
• Displacement of industrial use of LPG and fuel oil might also be targeted.
Main Points
The Lantau Group
Small scale LNG distribution
Liquefaction
Plant
LNG satellite
terminal
Port
Single of rack of
gas engines or
CCGT
1
2
3
4
LNG
LNG
LNG Port
Port
4
The Lantau Group
PLN’s power plants by type and region
5
The Lantau Group
PLN Data on 2011 diesel gensets and diesel usage
6
• PLN 2011 Yearbook says there are 4,786 diesel-fired power plants outside the island of Java.
• With installed capacity of 2,467 MW and rated capacity of 1,490 MW.
• These are mostly gen-sets and consume some 4.6bn litres of diesel a year, or the energy equivalent of
about 4.7 bcma, or 450 mmcfd.
Macro scale
The Lantau Group
• Small scale onshore LNG to mini loads
7
The Lantau Group
Over 50 CBM PSCs soon to be looking for a market for their gas
8
• Wellhead breakeven
is estimated in the
range of USD 7
mmbtu.
• But it will be several
years yet before full
commerciality is
achieved.
Source: BP MIGAS
Date awarded CBM Blocks Awarded Location Operator Participation
1 May-08 Sekayu South Sumatra Medco Medco, Batavia Energy, Ephindo
2 Jun-08 Bentian Besar East Kalimantan CBM Asia Ridlatama Mining Utama (farmed 70% to CBM Asia 2011 Oct?)
3 Jun-08 Indragiri Hulu Riau, Central
Sumatra Samantaka Mineral Prima Samantaka Mineral Prima
4 Nov-08 Barito Banjar I South Kalimantan Indobararambai Gas Methan Consortium of local KP holders, XOM
5 Nov-08 Barito Banjar II South Kalimantan Barito Basin Gas Consortium of local KP holders, XOM
6 Nov-08 Kutai West East Kalimantan Kutai West CBM CBM Asia, Newton Energy Capital
7 Nov-08 Sangatta I East Kalimantan Pertamina-Sangatta West CBM Ephindo, Pertamina, Arrow
8 May-09 Ogan Komering South Sumatra Ogan Interior Gas Ogan Interior Gas (Santos)
9 May-09 Sangatta II East Kalimantan Pertamina Hulu Energi Metana Kalimantan - Visi Multiartha Pertamina Hulu, Visi Multiartha (EMP)
10 May-09 Tabulako Kalimantan Artha Widya Persada EMP, Bumi Resources
11 Aug-09 Barito Tapin South Kalimantan Trisakti Gas Methane Trisakti Gas Methane, XOM
12 Aug-09 Kotabu South Kalimantan Satui Basin Gas Satui Basin Gas
13 Aug-09 Ogan Komering II South Sumatra East Ogan Methane East Ogan Methane (Santos)
14 Aug-09 Pulang Pisau Central Kalimantan Uangel Sigma Energi Sigma Energy Bumi, Blue Tiger
15 Aug-09 Tanjung Enim South Sumatra Pertamina Hulu Energi Mitra Enim Pertamina Hulu Energi Mitra Enim, Bukit Asam Metana Mitra Enim, Dart Energy
16 Nov-09 Barito South Kalimantan Trans Asia Resource - Jindal SS Indonesia Trans Asia Resoutrce, Jindal Stainless Indonesia
17 Nov-09 Rengat Central Sumatra Indon CBM Sigma Energy Bumi, Blue Tiger
18 Nov-09 Sanga Sanga East Kalimantan Vico Indonesia Vico Indonesia, BP East Kalimantan, Lasmo Sanga Sanga, OPIC Oil Houston, Virginia Inter Co, Universe Gas
& Oil
19 Nov-09 Batang Asin Central Sumatra Bumi Perdana Energy - Glory Wealth Pacific Bumi Perdana Energy, Glory Wealth Pacific
20 Nov-09 Muara Enim South Sumatra Trisula CBM Energy Pertamina Hulu Energi Metana Sumatra 2, Trisula CBM Energy (part of ASX listed Nu Energy)
21 Dec-10 Muralim South Sumatra Dart Energy (Muralim) E. Ltd Dart, Medco Energi
22 Mar-11 Kutai East East Kalimantan Senyiur CBM Senyiur CBM Consortium Inc. - Total E & P East Kutai
23 Apr-11 Kapuas I Central Sumatra Transasia CBM PT Transasia CBM consortium - BP Kapuas I Limited
24 Apr-11 Kapuas II Central Sumatra Kapuas CBM Indonesia Indonesia PT Kapuas CBM consortium - BP Kapuas II Limited
25 Apr-11 Kapuas III Central Sumatra Gas Methan Utama Methane Gas consortium PT Main - BP Kapuas III Limited
26 Apr-11 Kutai West East Kalimantan Gas Methan Gas Methan Abadi
27 Apr-11 Muara Enim I South Sumatra Pertamina Hulu Energi Metana Sumatera I Konsorsium Pertamina Hulu Energi Metana Sumatera I & Indo Gas Methan
28 Apr-11 Muara Enim II South Sumatra Pertamina Hulu Energi Metana Sumatera 5 Konsorsium PT Pertamina Hulu Energi Metana Sumatera 5 - PT Metana Enim Energi - PT Indo CBM Sumbagsel 2 Pte. Ltd.
29 Apr-11 Muara Enim III South Sumatra Pertamina Hulu Energi Metana 4 Konsorsium PT Pertamina Hulu Energi Metana Sumatera 4 - PT Baturaja Metana Indonesia.
30 Apr-11 Sijunjung West Sumatra Global Lion and Tamarin Hill Senyiur CBM Consortium Inc. - Total E & P East Kutai
31 Jul-11 Belida South Sumatra Sele Raya Konsorsium Sele Raya Resource & Andalas Metana Energi
32 Jul-11 Kutai II, East Kalimantan East Kalimantan Ephindo Konsorsium Ephindo Kutai North Inc. & Resources Alam Energi
33 Jul-11 Lematang South Sumatra Medco Konsorsium . Medco Cbm Lematang; Methanindo Energi Resources; & . Saka Energi Indonesia
34 Jul-11 Melak Mendung I East Kalimantan Ephindo Ephindo Mega Methana Inc
35 Jul-11 Melak Mendung III East Kalimantan Deep Industries Konsorsium Deep Industries Limited & Monnetispat & Energy Limited
36 Jul-11 Suban II South Sumatra Pertamina Hulu Energi Consortium PT Pertamina Hulu Energi Metana Suban II – PT. Suban Methan Gas
37 Aug-11 Suban I South Sumatra Pertamina Hulu Energi Konsorsium Pt Pertamina Hulu Energi Metana Subani & Pt. Suban Methan
38 Aug-11 Suban II South Sumatra Pertamina Hulu Energi Pertamina Hulu Energi Suban Ii& Pt Suban Methan Gas
39 Oct-11 Hulu Central Sumatra CBM Asia CBM Asia
40 Dec-11 Bangkanai I Central Kalimantan Bangkanai CBM Energi Sugico Graha
41 Dec-11 Bangkanai II Central Kalimantan Borneo Metana Energi Sugico Graha
42 Dec-11 Bangkanai III Central Kalimantan Bangkanai Energi Resources Sugico Graha
43 Dec-11 Bangkanai IV Central Kalimantan Bangkanai Jaya Perkasa Sugico Graha
44 Dec-11 Tanah Laut South Kalimantan Asam-Asan Methan Gas Asam-Asan Methan Gas, Sumber Daya Energi
45 Dec-11 Tanjung II Kalimantan Pertamina Hulu Energi Pertamina Hulu Energi
46 Apr-12 Air Komering Sumatera Selatan Baturaja Energi Konsorsium PT. Baturaja Energi – PT. Anugrah Persada Energi
47 Apr-12 Air Benakat I Sumatera Selatan Pertamina Hulu Energi Metana Sumatera 3 Konsorsium PT Pertamina Hulu Energi Metana Sumatera 3 – PT. Petrobara Sentosa
48 Apr-12 Air Benakat II Sumatera Selatan Pertamina Hulu Energi Metana Sumatera 6 Konsorsium PT Pertamina Hulu Energi Metana Sumatera 6 – PT. Prima Gas Sejahtera
49 Apr-12 Air Benakat III Sumatera Selatan Pertamina Hulu Energi Metana Sumatera 7 Konsorsium PT Pertamina Hulu Energi Metana Sumatera 7 – PT. Unigas Geosinklinal Makmur
50 Dec-11 West Sanga Sanga East Kalimantan Sugico Graha Sanga Sanga Prima Energi
51 Sep-12 Benlagon East Kalimantan Dart CBM Dart CBM
52 Sep-12 Belawa South Sulawesi Bumi Parahyangan Energi Bumi Parahyangan Energi
53 Sep-12 Sekayu South Sumatra Ephindo and Star Energy Ephindo and Star Energy
54 Sep-12 Kuala Kapuas I Central Kalimantan CBM Asia CBM Asia and Tranaco Utama
The Lantau Group
Key components of onshore small scale onshore LNG
9
• Liquefaction and storage
– Can be anywhere from 25 to 50 tonnes per day or 1.25 to 2.5 mmcfd (skid mounted) to 700 to 1,000 tpd or 35 to 50 mmcfd modular design.
• Delivery and Storage
– ISO tank on back of low loader truck serves as deliver and storage device – just like delivering milk.
• Regasification
– Tropical environment could use ambient air vapourisation but foot print can be large.
• Power plant
– Might be worth making them dual fuel if not too old but for those older ones of nearing major overhaul best probably to buy a gas engine (9 MW to 18 MW).
Power plant Small scale LNG liquefaction Ambient air regas ISO tank delivery by truck
Description of onshore small scale LNG delivery and use
Source: Linde Source: Liquiline Source: Cryogas Equipment Source: Wartsila
The Lantau Group
LNG usage at small remote mini power plant
10
• We take a plant with capacity of 10 MW and
average capacity factor of 67%
• This level of demand is very unlikely to support
conventional LNG delivery chain.
• But would fit with delivery by LNG offloaded
into ISO tanks on load loaders.
• In our example there would be the need for the
delivery per week of about ten 40 foot ISO
tanks with 16 tonnes of LNG for a total of close
to 160 tonnes per week.
• Storage on site of ten ISO tanks would give a
weeks stand by supply.
Consumption
At the plant level
Power plant MW 10
Hours per Day 16
HHV mmbtu MWh 7
mmbtu per Day 1,150
LNG mmbtu per tonne 50
LNG Tonnes per day 23
LNG Tonnes per week 160
The Lantau Group
High-level cost assumptions for small scale onshore LNG to mini power
11
• Upstream well head price.
– Close to USD 7 mmbtu from stranded CBM gas.
• Small scale onshore LNG plant
– USD 5 mmbtu
• 40 TEU container frame which contains and ISO tank with 16 tonnes of LNG and is delivered on a back of a low loader directly by road, pulled by a truck, using diesel or LNG, to a power plant.
– USD 1 mmbtu in round numbers for tractor, fuel and opex.
• The tank can contain the LNG for between 10 to 15 days before some blow off is needed to release pressure. So these tanks as well as being heat insulated are also built to take quite a bit of pressure (15 to 25 bar or 220 to 360 psi). We assume seven days of storage.
– This works out at a levelised capex number of near USD 2 per mmbtu.
• Vaporization could be by ambient air technology given relatively warm climate.
– This works out at a levelised capex of under USD 1 mmbtu.
• Gensets would need modified to use a mixture of mostly regasified LNG and some diesel for ignition, or else buy new gas engines that only use gas.
– Levelised cost of new plant USD 22 MWh at 67 capacity factor. Assuming a heat rate 7 mmbtu per MWh, implies cost of new plant, expressed in fuel terms, in the region of USD 3 mmbtu.
• Sums to USD 19 mmbtu so still plenty of headroom when compared to diesel price of about USD 30 per mmbtu.
0
2
4
6
8
10
12
14
16
18
20
1
US
D m
mb
tu
New gas engine
Vaporisation
ISO containers
Delivery by truck
Liqufaction
Upstream gas
Small Scale LNG Cost Assumptions Cost stack
The Lantau Group
• Small scale onshore LNG to industry
The Lantau Group
Coal production in Indonesia
13
• Coal production on the rise
• For the whole of Indonesia
• Kalimantan and Sumatra dominate
• Both are near CBM gas fields that are
looking to sell gas
0
50
100
150
200
250
300
350
2007 2008 2009 2010 2011
m t
on
ne
s
Coal Production Indonesia
Source: Ministry of Energy and Mineral Resources
The Lantau Group
Diesel displacement by LNG in mine trucks
14
• This is for the whole of Indonesia which means in practice Kalimantan and Sumatra
• Assumes 11.4 litres of diesel used per tonne of coal produced.
• GFS technology displaces about half of the diesel consumption.
• LNG demand of about 1.1 mmtpa or 3,000 tonnes per day or 150 mmcfd.
• Would need a mini-aggregator to collect LNG from various gas fields.
• This would also provide a level of security of supply to the buyers.
0
50
100
150
200
250
300
350
2007 2008 2009 2010 2011
mm
cfd
Diesel use converted to mmcfd
Trucks using half diesel and half LNG
Source: The Lantau Group
The Lantau Group
GFS Corp LNG-fueled mine truck retro-fit
15
• The EVO-MT™ System for Caterpillar 793 Mine
Haul Trucks allows operators to substantially
reduce operating costs and improve sustainability
by replacing diesel fuel with liquid natural gas
(LNG)
• The EVO-MT 7930 System is designed and
manufactured by GFS Corp of Weston, Florida and
is the world’s first commercial technology that
allows large mine haul trucks to operate on natural
gas.
• Has to use between 30 to 50% diesel to get
ignition.
• These trucks with 3,000 horse power are in a
separate class from road haulage which have a
tenth of that power.
• Tests with four truck in Wyoming have been
running for nine months and appear successful.
• Demonstration in Kalimantan have not started yet. Source: GFS Corp
The Lantau Group
Caterpillar LNG-fueled mine truck
16
• Caterpillar has said “natural gas is a clean burning,
economical fuel that is readily available to the
majority of our mining customers worldwide.”
• The company’s first LNG-powered products are
expected to include three large mining trucks—the
Cat 793, 795 and 797. The large trucks are in the
early stages of development with commercial launch
expected within five years.
• To accelerate the product development process,
Caterpillar is partnering with Westport Innovations,
Inc., a global leader in natural gas engines. The
company brings its Westport™ high pressure direct
injection (HDPI) technology, proven in on-highway
applications, to the relationship, complementing
Caterpillar’s strengths in engine and off-road
equipment development.
• In addition to offering new LNG products, Caterpillar
is developing retrofit solutions for those who opt to
convert existing mining trucks to natural gas.
Source: Caterpillar
The Lantau Group
Market price diesel less cost of small scale LNG
17
• We show here the unsubsidized diesel
price which the mining industry is
supposed to pay.
• Truck conversion cost estimate wrapped
up in netback bar.
• If delivered LNG cost is USD20 mmbtu
then savings per day could approximate
to USD 625 per truck per day based on
3,800 litre per day use of diesel, or
payback in a year.
0
5
10
15
20
25
30
35
Diesel Liquefaction, Transport,Storage, Vapourisation
Rent and Wellhead andTruck Conversion
USD
mm
btu
The Lantau Group
Non subsidised LPG less cost of small scale LNG
18
• Here we show the price that large
industrial users pay for bulk LPG in 50
kg containers.
• Subtracted is the LNG liquefaction,
storage, transport, storage and
vapourisation cost.
• This gives the potential price that
upstream CBM PSCs could sell their gas
for ex-PSC.
0
5
10
15
20
25
30
35
LPG Delivered Bulk MarketPrice
Liquefaction, Transport,Storage, Vapourisation
Rent and Wellhead
US
D m
mb
tu.
The Lantau Group
Displacing traditional fuels with onshore LNG
19
Context
• Small scale LNG on a remote onshore gas field is a quick way to market production.
• No need to wait to prove up huge reserves to justify a pipeline.
• No need to then wait for the pipeline to be built.
• Cost of Small Scale LNG infrastructure leaves plenty of headroom for reasonable upstream gas prices.
• Some parts of small scale LNG equipment are now becoming standardised driving down costs.
• Remote small diesel-fired generation sets might also be able to get LNG in pressurised container tanks
• Large potential market in Kalimantan and Sumatra to displace market diesel with LNG in mine trucks.
• Displacement of industrial use of LPG and fuel oil might also be targeted.
Main Points
The Lantau Group
Thank you
For more information please contact us:
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By phone +852 2521 5501 (office)
By mail 4602-4606 Tower 1, Metroplaza
223 Hing Fong Road,
Kwai Fong, Hong Kong
Online www.lantaugroup.com
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